Adverse Impacts of the World Bank’s Forecast
- The forecasted scenarios translate for South Asia into sharp declines in exports, disruptions in global value chains, deterioration of investment sentiment, reversal of capital flows, and reduced remittances.
- An extended lockdown for three months and a more partial lockdown in subsequent quarters would lead to a negative growth for the region, a contraction of 1%.
On Lockdown in India
- The lockdown is necessary, but not sufficient. It has to be complemented with food distribution, temporary work programmes and a system of testing and tracing, which is needed to reopen the economy.
- The temporary work programme could focus on food delivery, production of protective equipment, disinfection of public spaces and on the testing and tracing system.
Layoffs Abroad and Domestic Migrant Labour Crisis
- It is likely that migrant workers, especially in the Gulf countries, will return home, even if many are still stuck abroad at the moment. It is the consequence of the global recession and the sharp drop in oil prices.
- They will need to find work at home and will indeed compete with domestic migrant workers.
- That is why the government should create conditions under which the economy can be reopened and should play an active role in job creation.
Food Shortages and Tourism
- Food Shortage is one of the big concerns.
- Disruptions in the supply chain and panic buying can lead to price spikes. That, together with loss of income of many informal workers, can lead to food shortages for the most vulnerable.
- Releasing strategic reserves is one tool in the toolbox. Work programmes and food deliveries are other tools.
- Export bans will backfire as they will disrupt food supply chains in the region further.
- Tourism will not return to normal till effective vaccines become widely available. There will be demand for safe tourism.
- That might be an opportunity for Maldives that with its many atolls and high-end tourism has an opportunity to test tourists and keep them away from large crowds.
- There might be also more demand for digital services like remote learning or other remote services and for delivery of e-commerce sales. It is likely that more jobs outside the tourism industry can be created.